Home Owner’s Rights - Yep! You got ‘em!

“We feel everyone should be aware of this article,” says Jana Baldwin, Marlin Design and Construction. Contact Jana at (850) 545-7622 or email her at marlindesign@earthlink.net Marlin Design and Construction is an executive custom home building in the northwest Florida Panhandle.

To send Senator Don Gaetz and Email:  http://www.gulf1.com/Elected/gaetz/Gaetzmail.htm
 

“Homeowners Bill of Rights” Passes 32-7 in Florida Senate and Companies held accountable in sweeping reform of property insurance practices
 
The Florida Senate has approved a series of changes to the state’s insurance code that make it harder for insurance companies to raise rates and cancel policies and easier for policyholders to collect from insurers.
 
The overwhelming vote came after hearings held by the Senate Select Committee on Property Insurance Accountability into unfair and misleading business practices by insurance companies.
 
The “Homeowners Bill of Rights” is sponsored by Senator Jeff Atwater (R-Palm Beach), who chaired the panel.  Senator Don Gaetz (R-Niceville), a member of the select committee, is co-sponsoring the measure. 
 
The bill requires that insurance rates be set using only hurricane loss models that are scientifically valid and approved by the state.  Loss models  predict the likelihood and severity of hurricanes and potential losses and are used as the basis for rate-setting.
 
“We subpoenaed insurance executives and put them under oath,” Gaetz said, “We learned that some insurance companies purposely used unapproved models to justify huge rate increases.  They manipulated the actuarial analysis and overstated the risks.  Savings that should have gone to policyholders were diverted into stock buybacks and self-dealing transactions.  With this bill, these wrongful practices will be illegal.”
 
The legislation also ends the ability of insurers to appeal denied rate increases to arbitrators.  Under current law, when insurance companies ask for rate increases and are denied by state regulators they can appeal to an arbitration panel.  Arbitrators can be individuals with no background in rate-setting or actuarial analysis and are not even required to be familiar with Florida’s insurance regulations and market.  Supporters of the “Homeowners Bill of Rights” point out that these arbitrators often side with insurance companies and allow rate increases even when justification is flimsy.
 
Another reform made by the bill requires insurance companies to promptly pay undisputed claims.  Some insurance companies have refused to make any payment on a claim if any part of the claim is disputed.  The “Homeowners Bill of Rights” stops this practice.  The bill allows policyholders to receive payment within 90 days for all parts of a claim that are agreed upon even while disputed aspects are still being settled. 
 
“During our ‘Neighborhood Days’ in Gulf Breeze and Navarre I met with many people who were victimized by ‘take it or leave it’ settlements after sustaining serious hurricane damage,” Gaetz said.  “Some insurance companies told their customers they would receive no payment whatsoever if there was any dispute about any part of the claim.  So, in desperation, families agreed to accept less in order to get something.  Our bill remedies this injustice.”
 
 The select committee found that certain insurance companies justify rate increases based on some of their customers living near the coast and then cancel those policies while keeping the rest of customers’ rates high.  The legislation allows the Office of Insurance Regulation to disapprove rates if companies engage in this practice.
 
The bill also requires that insurance companies provide discounts to homeowners who reduce risk of windstorm damage, based on the uniform home rating scale.An additional aspect of the proposal is a requirement that policies be guaranteed renewable for at least three years if a home meets the windborne debris protection requirements of the Florida Building Code.  This provision will stop the all-too-prevalent practice of canceling policies even when the property does not present a significant risk to insurers.
 
Potential purchasers of a home will be entitled to know the property’s windstorm mitigation rating if the bill passes. 
 
The “Homeowners Bill of Rights” now goes to the House of Representatives for action.  To follow the progress of this legislation and learn which senators have supported or opposed the bill go to www.flsenate.gov and enter Senate Bills 2860 and 1196.

 

To send Senator Don Gaetz and Email:  http://www.gulf1.com/Elected/gaetz/Gaetzmail.htm
 
If you do not wish to receive future legislative updates from Senator Gaetz click here: http://www.gulf1.com/mail/elected/Remove_gaetz.htm

Polls say 11% are firm in buying…

We thought this article was interesting. “We’re concentrating on the 11%,” says Jana Baldwin of Marlin Design and Construction, a very well known executive custom home builder in the northwest Florida Panhandle. “We’ve seen tough times before and the only thing to do is hang tight and keep your head up. Some people might snub their nose at the 11%. We don’t.” Jana may be reached at (850) 545-7622 or at email address marlindesign@earthlink.net  Visit www.marlindesignandconstruction.com to view the quality home Marlin Design builds.

 WASHINGTON – April 14, 2008 – A growing majority of homeowners say they won’t buy a home anytime soon, the latest sign of increasing pessimism about the nation’s housing crisis, a poll showed Monday.

In a vivid sketch of how the sputtering real estate market is causing distress throughout the country, the Associated Press-AOL Money & Finance poll found that more than a quarter of homeowners worry their home will lose value over the next two years. Fully one in seven mortgage holders fear they won’t be able to make their monthly payments on time over the next six months.

“This is a great time to buy, but not necessarily to sell,” said Robert Jackson, who lives in a two-bedroom house in Ferguson, Mo., with his wife and four young children. He said he would love to purchase a larger home, but can’t because even if he found a buyer, he would probably lose thousands on his house, which he bought less than two years ago.

“We’re just going to have to slap a Band-Aid on it and stay here until the market gets a little bit better,” Jackson, 30, said in a follow-up interview.

Jackson is not alone. Sixty percent said they definitely won’t buy a home in the next two years, up from 53 percent who said so in an AP-AOL poll in September 2006. At the same time, just 11 percent are certain or very likely to buy soon, down from 15 percent two years ago.

The growing reluctance to dip into the housing market seems to stem partly from worry that housing prices will continue falling – good if you’re buying a house but bad if you have to sell one.

The number envisioning falling prices in their area has grown to one in four, while four in 10 think prices will rise, a decrease from two years ago. Expectations for rising prices are highest in the South, with Westerners likeliest to predict they will drop.

Underscoring the public’s unsettled feelings, the number saying local housing prices are about right has fallen to 35 percent. Half say homes are overpriced – especially in the Northeast - while those saying housing is underpriced have doubled to one in 10, particularly Midwesterners.

Some pockets buck regional trends. Laurie Jensen, a single mother of three, struggles to make payments on her home in Whitehall, Mont., by working as a seasonal road construction flagger and at times collecting unemployment. She said she’d like to move outside of town, but the area is popular and prices have surged.

“Things are pretty crazy,” she said. “Places I don’t consider that great are really expensive.”

One in 10 have adjustable rate mortgages, half of the number who said so two years ago. These mortgages generally start at a low interest rate and are later adjusted to market conditions – which has often meant steep, unaffordable boosts that have forced many to refinance or even lose their homes.

Daniel Gallego, a warehouse worker in Stockton, Calif., said he may have to sell his home at a big loss. He said rising gasoline and other costs have made his adjustable rate mortgage unaffordable. Because he doesn’t expect his home’s value to recover soon, he said he may be better off moving now, before his rates rise.

“We may have to move in with my wife’s parents or my parents,” said Gallego, 30, who has two young children. “I could pay off some debt, then we could rent, and maybe buy another house in a few years.”

The public anxiety is in reaction to an economy that is veering toward recession and losing jobs even as the housing market sputters badly. Foreclosures have soared to record highs, mortgage rates have increased, sales of existing and new homes have fallen and home values have dropped.

Gus Faucher, director of macroeconomics for Moody’s Economy.com, a consulting firm, estimated that 9 million homeowners owe more on their home than it’s worth. He said his company believes home sales are at or near bottom and home values will continue to fall until early next year.

Even so, he said, many people bought their homes before the run-up in values that started around 2001 and remain in good shape.

“So the value of your house goes down temporarily,” he said. Unless the homeowner must sell now or can’t afford the payments, “that doesn’t have that much of an impact.”

The poll also found:

• The biggest worriers are those expecting to buy soon. Of that group 43 percent frets that their home’s value will drop in the next two years, compared with 25 percent of those not expecting to buy shortly.

• Fifty-nine percent think now is a good time to buy.

• Half think this is a very tough time for first-time buyers, an increase from two years ago. Nearly two-thirds think it’s harder for first-home buyers than it was five years ago.

The AP-AOL Money & Finance poll was conducted from March 24-April 3 by Abt SRBI Inc. It involved telephone interviews with 1,002 adults nationwide, and the margin of sampling error is plus or minus 3.1 percentage points. Included were interviews with 769 homeowners, for whom the sampling margin of error is plus or minus 3.5 points. The margin of sampling error for other subgroups was larger.

Global Home Buyers - It’s A Great Time For It!

Jana Baldwin, Marlin Design and Construction, custom executive home builder of the Northwest Florida Panhandle, keeps up with the global home market, remarking that this is a great time to “Meet Our Global Neighbors” - Jana may be reached at (850) 545-7622 or by email at marlindesign@earthlink.net — Be sure to visit their website at www.marlindesignandconstruction.com for your custom home building needs, house plans and homes & lots for sale.

Realtors reach out to international buyers: It’s a great time for international clients to buy
WASHINGTON – April 14, 2008 – As the falling dollar makes the U.S. second-home market more attractive to international buyers, the National Association of Realtors® (NAR) joined with the Salon Immobiliario de Madrid (SIMA), Europe’s largest home and resort exposition, to educate potential buyers about U.S. real estate investment options.

More than 100,000 homes are sold to foreigners annually in the international second-home market, particularly to buyers from Europe, North and South America, Africa and the Middle East. Current valuations of the U.S. dollar against foreign currencies have made U.S. property one of the world’s great bargains, and the prestige of owning U.S. property remains high.

“This is our fifth year participating in the SIMA event, which draws investors from more than 50 countries,” says Miriam Lowe, NAR’s vice president of international affairs. “As the leading advocate for real estate in this country, NAR welcomes this opportunity to educate overseas buyers about the benefits of real estate investment in the United States.”

The Florida Association of Realtors, the Realtor Association of Greater Miami and the Beaches, and the Sarasota Association of Realtors joined NAR as sponsors of the SIMA trade show.

Vani Ungapen, FAR’s director of international & research, made a presentation to SIMA participants last week on Florida’s real estate market and that it is a great time to buy. “It was very well attended and the Europeans are still very interested in Florida,” she says. “This is FAR’s fourth time at SIMA and half of the attendees from the U.S. are from Florida.”

In a 2007 NAR study, 18 percent of all Realtors surveyed had at least one client involved in an international transaction in the previous year. An additional 14 percent had international prospects that had not yet completed a transaction. In Florida, the numbers were considerably higher; 65 percent of Realtors in the Sunshine State had foreign clients in the previous year.

“Fifteen percent of all Florida home sales now involve foreign purchasers,” says Lowe. “In part, this interest in the United States stems from the fact that more and more people in different nations recognize the value of owning real property, and our country represents one of the best and safest places to make such an investment.”

The SIMA international second-homes exposition took place April 8-12 in Madrid. The event attracted resort developers and second-home investors from around the world and featured more than 800 trade exhibitors.

© 2008 FLORIDA ASSOCIATION OF REALTORS

Tax Situation You Decide: Charm or Strikeout

Jana Baldwin, Marlin Design and Construction (www.marlindesignandconstruction.com) leaves this article up to the reader to decide. Marlin Design and Construction is a north Florida Custom Home Builder. Jana may be contacted at (850) 545-7622 or email her at marlindesign@earthlink.net She welcomes all comments.

TALLAHASSEE, Fla. (AP) – April 14, 2008 – The third time may be the charm, or it could be a strikeout, for a proposed state constitutional amendment that would cap state and local taxes, fees and other revenues.

The Taxation and Budget Reform Commission will take it up again Monday after twice delaying a vote. The panel ran out of time at each of it’s last two meetings after spending hours hearing what officials, lobbyists and taxpayers – mostly taxpayers – had to say about the proposal that could chop billions of dollars from government budgets.

Another postponement is unlikely because the commission is facing a May 2 deadline for placing it on the November ballot.

“It’s do or die Monday,” said Commissioner Mike Hogan, Duval County’s tax collector and the measure’s sponsor. “The debate has gone on long enough.”

It’s a debate Hogan’s unsure he can win. It takes 17 of the commission’s 25 voting members to approve a constitutional amendment. Some commissioners are expected to be absent, including at least one Hogan had been counting on, and they in effect will be no votes.

There’s also been little consensus among the commissioners, who have offered 29 amendments to the proposal.

At it’s last meeting, the commission accepted an amendment that would let the Legislature decide the details of local revenue limits and change them in the future if necessary. It also removed a provision that would have required voter approval of tax increases.

Those changes are designed to win over commissioners who are worried about unintended consequences of a difficult-to-change constitutional provision and believe elected officials should have taxing authority in a representative democracy.

“It’s a very simple concept, but to make it work there’s some hazards,” Hogan acknowledged.

The skeptics include Commissioner Martha Barnett, a Tallahassee lawyer who also served on the commission when it last met in 1990-92 and on the 1997-98 Constitution Revision Commission.

She said the case still hasn’t been made to her that such constraints should be put on state and local elected officials.

“There is a way to get rid of them every two or four years,” Barnett said. “I believe that is a far better system.”

Hogan’s proposal is patterned after Colorado’s Taxpayer Bill of Rights, or TABOR, that’s also being advocated by some national conservative and libertarian groups.

The Florida cap would be based on the 2008-09 revenue level with allowances for growth based on inflation and population increases plus 1 percent.

Hogan, though, says his proposal is not as restrictive as Colorado’s because it would allow local government bodies and the Legislature to override the caps through two-third majority votes.

That has done nothing to mollify critics. It still would force drastic cutbacks in schools and other public services as happened in Colorado, said Jim Tait, executive director of the Florida Center for Fiscal & Economic Policy, a Tallahassee think tank.

The center has estimated the state would have had to rebate $3.7 billion in the 2005-06 budget year if the cap had been in place then. That’s about equivalent to all state prison and public safety spending. The cuts in the next two years would have been $1.4 billion and $1.7 billion, the center estimated.

A similar proposal was introduced in the Legislature last week by a House committee, but it’ll be difficult to get it through both chambers with only three weeks left in the session.

Voter approval of tax increases is a popular aspect of Colorado’s plan and Florida’s version may fail at the polls without it, said David Biddulph, a New Smyrna Beach businessman who serves as an adviser to Americans for Prosperity, one of the groups supporting Hogan’s plan.

Biddulph, though, said his group will support “anything that would curb the appetite of government.”

Florida Taxes Make for an Interesting Blog Read…

Jana Baldwin, Marlin Design and Construction, www.marlindesignandconstruction.com picks this article about taxes as a good read for the blog. Call Jana at (850) 545-7622 or (850) 576-3978 for information about Marlin custom homes in the Tallahassee and Freeport, Florida areas.

Forecasts clash on impact of Florida tax swap TALLAHASSEE, Fla. – March 24, 2008 – When a state tax commission envisioned a huge cut in property taxes and an increase in the sales tax, it asked a veteran economic forecaster to examine the financial consequences of the swap.

He said it was a bad idea.

Employment projections would fall by about 50,000 jobs and $28 billion in personal income would be lost over a 10-year period, economist Tony Villamil predicted on the basis of computer models.

“We were shocked,” said John McKay, a former Senate president and now a leading member of the Taxation and Budget Reform Commission. “Seldom are the conclusions of an economist’s report all negative. Our common sense told us that wasn’t correct.”

So, on McKay’s recommendation, the commission hired another forecaster.

Hank Fishkind used a different computer model and came to a different conclusion: The tax swap would stimulate the economy, creating 72,000 jobs and boosting home construction by $6.9 billion.

“He did a very solid job,” McKay concluded.

Which projection is correct – if either – is a key to how the sweeping tax changes would alter the state’s economy if voters approve the property-tax cut in November and it takes effect as planned in 2010. It would be up to the Republican-controlled Legislature to decide how to replace the revenue: a sales-tax increase, the elimination of certain sales-tax exemptions, other revenue hikes or a combination of changes.

When The Miami Herald showed the Fishkind and Villamil studies to three other economists, all found flaws. That could mean state leaders are contemplating huge changes without being certain of the economic consequences.

“Both these studies have shortcomings,” said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida.

Snaith questioned an underlying assumption of the tax commission – that Florida needs to have very low taxes to attract new businesses and residents. “If low taxes is all it took, North and South Dakota would be boom states,” Snaith said.

Villamil and Fishkind, both veterans in assisting governments with tough economic decisions, praise each other as professionals. But they vehemently attack each other’s work in this case.

Fishkind: “I like and respect Tony, but he’s just wrong here.”

Villamil: “The model he used is a much simpler model than the one we used, and it doesn’t take into account a lot of the complexities.”

Villamil, who heads the Washington Economics Group, based in Coral Gables, has served on advisory councils for both George W. and Jeb Bush. For two years, he worked for Jeb Bush, focusing on economic development.

For the tax study, Villamil and a colleague, Barry University Professor Robert D. Cruz, relied on the REMI model, developed by Regional Economic Models Inc. It’s often used by Florida and other state government forecasters to try to predict the effects of changes in revenue and spending.

In this case, the commission’s proposal to reduce property taxes by $9 billion a year and expand the sales tax to make up that money would cost Florida’s economy an average of $1.7 billion a year from 2010 to 2020, the REMI model found.

Effect on jobs

Florida is projected to have regular job growth of about 169,700 a year through 2015, according to the state Agency for Workforce Innovation. But Villamil’s projections say that the tax swap would reduce that growth by a cumulative 47,000 over the 10-year period. “So that’s not a huge decrease,” said Villamil, “but it’s a decrease.”

The reason for the decline, said Villamil, is that it’s not an equal swap to put $9 billion into the pockets of property owners and take $9 billion out of the pockets of people paying sales taxes on goods and services.

“There are two major leakages,” Villamil said. “One is that many property owners are out of state. We only use 10 percent in our assumptions” for the computer model, but my guess is it’s closer to 25 percent in some areas, like Miami.”

For those out-of-state owners, a drop in property tax is a “windfall,” which they might spend in Caracas or Manhattan, or put into an Atlanta bank, Villamil said.

The second leakage: Because property taxes are deductible on federal tax returns, a drop in Florida property tax means that people will pay more federal income tax, Villamil said. (State sales taxes are also deductible, but it’s usually a much smaller deduction.)

Those leakages could have complex effects, resulting in less money spent in Florida. Add the possibility that higher sales taxes mean fewer sales, and that would lead to fewer jobs, in both government and business.

“This isn’t Tony Villamil talking. This is what the model says,” the economist told The Miami Herald. And because of that, Villamil concluded, the proposed tax swap “is not good, sound policy for the state of Florida.”

Fishkind disagrees. He calls the property tax on education that the commission wants to drop “a bad tax for Florida” and praises the commission for trying to get rid of it.

A onetime economics professor and director of forecasting at the University of Florida, he heads Orlando-based Fishkind & Associates, which has offices statewide. He does extensive forecasting for local governments, redevelopment agencies and real-estate developers.

For his study, Fishkind used the RIMS II model, Regional Input-Output Modeling System, developed by the U.S. Department of Commerce. Fishkind found that a decline in property taxes would make housing cheaper, lure an extra 56,000 people to the state, and cause a new wave of construction.

Fishkind told The Miami Herald that there is nothing wrong with the REMI model that Villamil used. “It’s a good model. Maybe he put something in there that was wrong.”

Villamil counters that Fishkind’s model is overly simplistic. “It just doesn’t have the dynamic capabilities that REMI has.”

The views of others

Other economic experts interviewed by The Miami Herald questioned whether a drop in property tax automatically leads to more construction.

John Burford, an economist with the International Bank of Miami, said that because of oversupply and declining prices in real estate, “I don’t think it would make any difference now” if property taxes decreased.

By 2011, after the proposed changes took effect, construction might be trending back upward, Burford said, but that might be primarily because of the cyclical nature of real estate.

Donald Ratajczak, professor emeritus at Georgia State’s Economic Forecasting Center, said that both Villamil and Fishkind “overstate their cases.” He believes that the leakages would be less than Villamil predicts and the stimulus less than Fishkind foresees.

Overall, the tax swap could create problems, Ratajczak said. Higher sales taxes would mean a reduction in sales, he said. “That would create a near-term deficit requiring either higher taxes or reduced services.” That “in turn will alter competitiveness and slow migration.”

He said he didn’t agree with Fishkind’s theory that “rewarding current property owners leads to attracting new owners.”

Jorge Salazar-Carrillo, an economics professor at Florida International University, said Fishkind’s RIMS model “has a very distinguished usage. It doesn’t give the richness of the REMI model, but it could be that the REMI model gets lost in the complications in this analysis.”

“I would probably rely on the Fishkind analysis more,” Salazar-Carrillo said. But he disagrees with Fishkind’s conclusion that the state property tax for education is “bad” and needs to be replaced by an increased sales tax.

“You’re hurting poor people with the sales tax,” Salazar-Carrillo said, because studies show that 70 percent or 80 percent of the poor’s expenditures are subject to sales tax while only 20 percent or 30 percent of the rich’s spending is subject to sales tax. “It’s a very regressive tax.”

Snaith, at the University of Central Florida, said both studies cause “a sort of head-scratching.” When Villamil called REMI “the gold standard” in his presentation to the commission, “I think that’s overselling.”

But Fishkind’s conclusion on reducing property taxes and increasing sales taxes doesn’t make sense to Snaith. “Tiger Woods is going to pay less property tax on his mansion, but the renter is going to struggle to find more money when he goes to the store.”

Martha Barnett, a member of the commission, said the Fishkind study made more sense to her than Villamil’s – “but maybe that’s because its conclusions were more in line with my thinking.”

Copyright © 2008 The Miami Herald, John Dorschner. Distributed by McClatchy-Tribune Information Services.

Great Time to Buy In Florida - This makes sense.

 Jana Baldwin, Marlin Design and Construction, brings another interesting article about taxes to the board….
[Jana Baldwin is partner and marketing director for Marlin Design and Construction - Custom Residential Homes built in northwest Florida. You may visit www.marlindesignandconstruction.com to view the beautiful homes or call her at 850.545-7622 or 850.576-3978 for more information.]

Great Time to Buy Florida

ORLANDO, Fla. – March 3, 2008 – Too many buyers are focusing on home prices and waiting to jump into the market, afraid that a property bought today will be worth less tomorrow. But rising mortgage rates should also be a concern, and many potential buyers could find themselves out of luck if they wait much longer.

Jim Svinth, chief economist at mortgage firm Lending Tree, tells buyers to “ignore the headlines.” As the economy recovers, finance costs will rise. Waiting for the perfect time to get into the market may cost prospects, especially renters, more in the long run.

“The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher,” says Svinth. Any savings you might incur by a further drop in prices might be offset by rising financing costs.

Let’s take a home priced at $250,000. With a 20 percent downpayment and 30-year fixed-rate mortgage at 6 percent, monthly payments would be $1,199.10 (principal and interest only).

If the price of this home were to drop 10 percent one year from now to $225,000 – but mortgage rates rise to 7 percent – the monthly payment for a 30-year fixed-rate mortgage with 20 percent down would be $1,197.54 (mortgage and interest only) — a difference of $1.56 a month.

It’s almost impossible to predict the direction of long-term mortgage rates, but investors tend to pull back from long-term investments, such as those that feed fixed mortgage rates, if inflation appears to be a threat as it does now. On Friday, Federal Reserve Chairman Ben Bernanke admitted that the Fed viewed inflation as a concern; though he does not think “stagflation” – a slowing economy coupled with inflation – is an immediate problem.

Why Houses Are Nearing Rock Bottom - Not what you think

Jana Baldwin, co-owner and Director of Marketing of Marlin Design and Construction with offices in Tallahassee and Freeport, in Northwest Florida’s Beautiful Emerald Coast Panhandle is constantly searching for more valuable information about the housing market. Jana may be contacted at 850.545-7622 or 850.576-3978 for more information or visit http://www.marlindesignandconstruction.com/

Why Housing Prices Are Nearing Bottom

By Marko Djuranovic

February 25, 2008 A recent BusinessWeek cover story touted the idea that housing prices could fall by another 25%. Although some areas are looking at a precipitous drop in prices, for the most part, current housing prices are nearing bottom. Forces other than loose lending standards and a corresponding spike in demand are responsible for the recent rise in housing prices, and these have not abated. These are not your father’s houses.

The BusinessWeek article used an index that tracks home prices as far back as 1890 to conclude that home values have historically risen annually from 0.2% to 0.8% above inflation. Using these trend lines, the article found homes to be significantly overvalued. But there are problems with drawing this inference. First, today’s homes are not the same homes that were built three decades ago. Census data show that in 1973 the median size for a newly built home in the U.S. was 1,525 sq. ft. In 2006 it was 2,248 sq. ft., a 47% increase.

Second, today’s homes feature sturdier construction materials, more expensive siding, outdoor additions like in-ground pools, more complex wiring to support an increasing number of electronic devices, sophisticated heating and cooling systems, and larger kitchens (which translate to increased cabinetry).

Simply, these are better homes — and “better” here means more expensive to build.

Third, prices of inputs into the construction process are more expensive these days in relative terms. The bull market in basic materials that started several years ago has raised the costs of construction, and these costs have been passed on to the consumer.

Taking these factors into account implies that housing prices should have grown at least 2% above inflation in the past 30 years, putting the current median home price about where it should be.  

Check the margins
The largely fixed expense of building today’s homes gets us to the next reason why most homes are probably priced near their fair value. The table below shows gross margins for a collection of eight publicly traded homebuilders. (For homebuilders, gross margins represent the difference between the price at which the home sold and how much it cost to build, inclusive of any land acquisition costs. The cost of superintendents and sales staff to move the properties is not recorded here; it’s a part of SG&A and often runs above 10% of revenue.)

	1998	1999	2000	2001	2002	2003	2004	2005	2006
DR Horton (NYSE: DHI)	19%	18%	20%	21%	20%	22%	24%	27%	24%
Centex	7%	9%	9%	10%	11%	10%	13%	14%	13%
KB Home (NYSE: KBH)	20%	20%	21%	21%	23%	23%	24%	27%	20%
Lennar (NYSE: LEN)	N/A	12%	11%	15%	15%	14%	14%	16%	7%
MDC Holdings (NYSE: MDC)	8%	11%	14%	14%	14%	14%	18%	17%	24%
Meritage Homes (NYSE: MTH)	20%	19%	20%	21%	19%	20%	20%	24%	21%
Ryland Group (NYSE: RYL)	19%	19%	18%	20%	23%	24%	25%	27%	23%
Toll Brothers (NYSE: TOL)	23%	23%	25%	27%	28%	28%	29%	30%	26%
Average	17%	16%	17%	19%	19%	20%	21%	23%	20%
Median	19%	18%	19%	21%	20%	21%	22%	25%	22%

Source: Morningstar.com, Yahoo! Finance.

Most homebuilders operate without particularly high gross margins. Although there has been a steady rate of margin expansion since the late 1990s, note that margins in 2006 had already returned to 2003 levels, the beginning of the current housing boom. Thus, even a 3% drop in prices would bring builders’ gross margins well below the levels seen in the previous recession, threatening their profitability. (Land costs, which are not tied to increased costs of construction, would have to fall substantially to negatively influence home prices — a general rule of thumb is that, for most residential homes, land comprises only 20%-25% of total value.)

This is important because it creates a floor for the price at which homebuilders will be willing to create additional inventory. Buyers will thus be faced with builders willing to slash prices drastically on existing inventory but unwilling to offer similar discounts on future projects. What does all this mean for the housing market? When the financial institutions rediscover how to assess effectively borrowers’ default risks, the supply of existing homes will fall fairly quickly.

And the moment that the supply of existing homes begins to shrink, potential first-time homebuyers will realize that between low interest rates and homes that sell at (or below) replacement cost, they can grab the deal of a lifetime.

Objects in the rearview mirror …
In 1999, tech investors bid up pieces of paper that were backed by fictitious profits of economically stillborn companies. When the bubble burst, the search for the asset’s true worth — often close to zero — was a painful one. But houses are a different typw of asset; they depreciate slowly and meet a need for which there is plenty of demand: shelter. Overall, the condition of the U.S. housing market is not nearly as bad as some analysts would have you believe. So, the entire homebuilding industry is worth a closer look.  

Interesting Article on Taxes…

Jana Baldwin, Marlin Design and Construction, brings another interesting article about taxes to the board….
[Jana Baldwin is partner and marketing director for Marlin Design and Construction - Custom Residential Homes built in northwest Florida. You may visit www.marlindesignandconstruction.com to view the beautiful homes or call her at 850.545-7622 or 850.576-3978 for more information.]

Lawsuit challenges portability proposal: Pressure for more tax cuts

While the latest lawsuit is the first to question property tax portability through the courts, challenges to Florida’s Save Our Homes amendment are not new. “There have been challenges to Save Our Homes for 15 years, so we expected a lawsuit regarding portability,” says FAR Vice President of Public Policy John Sebree. “We see this as an opportunity – it puts pressure on the Legislature to go even further, targeting additional relief to first-time homebuyers and the non-homestead property owners who need it so desperately.”

TALLAHASSEE, Fla. (AP) – Feb. 14, 2008 – A lawyer for three new Florida homeowners has filed a lawsuit in state court challenging the portability portion of the Save Our Homes Amendment.

The plaintiffs, homeowners in Tallahassee, Port Charlotte and North Palm Beach, are also seeking tax refunds for themselves and other recent homebuyers, which could cost local governments and school districts billions of dollars.

Save Our Homes caps annual assessment increases at 3 percent for primary homes, or homesteads. That means the plaintiffs and other recent homebuyers are paying much higher taxes than longtime residents with homes of the same or similar value.

The amended lawsuit alleges Amendment 1, which voters adopted Jan. 29, increases the disparity through a “portability” provision that lets homesteaders take their Save Our Homes benefits with them when they move.

A state judge in Tallahassee last year dismissed a similar lawsuit by out-of-state owners of second homes in Florida that challenged Save Our Homes on grounds that it violates anti-discrimination provisions of the U.S. Constitution. An appeal is pending.

Gov. Charlie Crist, who touted the plan, said Wednesday he was confident the new tax-cutting proposal will withstand a legal challenge.

“Part of my confidence is based on the fact that Save Our Homes has been in existence since 1992,” Crist said. He said Amendment 1 is “an extension of that.”

Property Insurance

Companies used loophole in law to justify increases. Jana Baldwin, Marlin Design and Construction, www.marlindesignandconstruction.com, searches tirelessly for information about the Real Estate market in northwest Florida. Jana may be reached at 850-545-7622 or email at marlindesign@earthlink.net

TALLAHASSEE, Fla. – Feb. 6, 2008 – It appears some of the state’s biggest insurers tried to use loopholes in a law to skirt a requirement that they pass savings from a state-backed financial safety net to homeowners.

That’s one of the conclusions drawn Tuesday after two days of Senate hearings on compliance with a law passed last year to quell Florida’s property insurance crisis.

Executives from insurance companies testified under oath about why they didn’t reduce prices for consumers, as the Legislature demanded last year in exchange for offering insurers cheaper backup storm coverage.

With the annual legislative session starting in March, lawmakers said they could consider fixing loopholes in last year’s law.

In one such gap, the law didn’t explicitly indicate methods insurers can’t use to predict risk and ultimately set insurance policy prices, said Sen. Steve Geller, D-Hallandale Beach.

Insurers such as Allstate Floridian Insurance Co. and Nationwide Insurance Co. of Florida based rate increase requests last year on storm risks over the next five years instead of the customary 100 years. A special state commission approves risk prediction methods, but use of unapproved methods, such as the five-year projection, results in higher insurance rates.

“This is the single most significant issue that we’ve heard,” said Geller, co-chairman of the Senate Select Committee on Property Insurance Accountability, formed last month to hold insurers accountable for rate cuts that legislators pledged to the state’s homeowners last year. “If we simply resolved that issue, I think we’d resolve half the disputes we’re having.”

Another issue senators may want to look at during the regular session, Geller said, is whether to clarify a state law enacted in 2006 that allows insurers to earn “reasonable profits.”

State insurance regulators have recommended insurance companies use a 3.7 profit margin – not including income earned on investments – to calculate property insurance prices. But executives from companies such as Allstate Floridian, Nationwide and Hartford Insurance Co. of the Midwest testified that they used profit margins of 15 percent or more to calculate rate requests last year. What’s more, Hartford officials said they used $1 billion last year to buy back stock. Allstate also has bought back stock in recent years.

The Senate committee might continue its hearings on Feb. 18 or 19 to discuss findings and recommendations such as those outlined by Geller. If there’s time before the Feb. 29 deadline for final drafts of new bills for the coming legislative session, the committee might ask rating agencies, risk predicting companies and reinsurers to testify about their relationships with the insurance industry.

This week’s hearings are the latest battle in a long feud between state government leaders and the property insurance industry. Last year, legislators expanded the state reinsurance program and expected insurers to pass along the savings by cutting homeowner coverage prices. But many insurers requested rate increases that were rejected by regulators.

One insurer, American Strategic Insurance Corp., managed to reduce rates last year by a statewide average of 20 percent, and senators praised the company during the hearings.

In December, Gov. Charlie Crist threatened to sue the insurance industry, and state Insurance Commissioner Kevin McCarty last month tried banning Allstate Insurance Co. and nine affiliates from selling new insurance policies statewide until they turn over all the financial documents his office wants as part of an investigation. A state appeals court blocked McCarty and now the two sides are locked in litigation.

State insurance regulators and legislators at the hearings said they thought modeling – or methods used to predict the risks of hurricanes that help set policy prices – had been addressed after Hurricane Andrew in 1992. That’s when insurers said they needed computer models using tens of thousands of years of hurricane data to help predict risks in the long term to level out drastic fluctuations in the short term.

Legislators in Florida and several other states approved the models even though rates shot up. But after damaging hurricanes in 2004 and 2005, industry officials started saying they needed to project risks five years out because they believed this is a time of increased hurricane activity, in part because of warming sea surface waters.

State law doesn’t explicitly prohibit insurers from using the models, according to testimony at the hearings. Allstate and Florida Farm Bureau General Insurance Co. use the near-term methods to estimate risks that ultimately determine rates.

Insurance executives said the near-term projection helps them better assess risk and is backed by scientists at modeling companies.

State officials said modeling company executives developed the five-year method to meet demand from insurers.

“The short-term model was developed at the behest of the insurance industry,” Deputy Insurance Commissioner Belinda Miller said.

Some senators said they think the law passed last year will work as long as regulators continue rejecting proposed rate hikes. Rate requests from Allstate, Hartford and Florida Farm were rejected last year and are pending negotiation or final decisions.

“They can use the models all they want until the cows come home, but [regulators] haven’t approved a penny” in situations where they thought insurers were unreasonable, said Sen. Bill Posey, R-Rockledge.

Copyright © 2008 South Florida Sun-Sentinel, Julie Patel. Distributed by McClatchy-Tribune Information Services.

Public Awareness Campaign: Market Facts

Jana Baldwin spots an interesting ad concerning home purchases. Click here to download the ad: market_facts_usa_today.pdf 
[Jana Baldwin is Vice President of Public Relations and Marketing for Marlin Design and Construction. Jana may be reached at 850-545-7622 for information about designing and building your custom residential home or seeing some of the present homes built in the beautiful communities in Northwest Florida.
Visit: www.marlindesignandconstruction.com ]

Buying a home is a great way to build long-term wealth. There are some other important dividends, too.To counter recent negative housing reports in the media, NAR is helping local REALTOR® associations across the country explain the real facts behind the real estate market in their area.NAR has created a print ad that targets potential home buyers, educating them about the long-term value of housing and providing insight into local real estate markets to help buyers make informed decisions about what can be the biggest investment opportunity of their lives.A full-page version of the ad will run in USA Today on November 2 and November 9, 2007. Local versions of the ad will run in select markets nationwide on November 4 and November 11, 2007. Local REALTOR® associations can create and place a version of the ad in their own markets. Visit the online Ad Generator and select “Public Awareness Campaign,” “Buyer” to request a customized version. View the National Print Ad Click on the image to enlarge it, and please wait up to 15 seconds after clicking for the PDF to appear.